Rocky Mountain District Symposium Homeownership Trends and Data

The Brown Palace Hotel - DenverJune 28 – 30, 2011

2

Critical Homeownership Program Issues

• Economic– Unemployment still high;– Home foreclosures are still affecting market;– Home values still falling or staying flat;

• Regulatory – “Qualified Mortgage”, Risk Retention;– Unclear future of GSE reform;– FHFA very conservative;– IRS 501Q

33

Most Jobs Lost Since Post-WW2 Era

4

Unemployment Rates – May 2011

State Percent

Nevada 12.1

Idaho 9.4

Arizona 9.1

Colorado 8.7

Texas 8.0

Montana 7.6

Utah 7.3

New Mexico 6.9

Wyoming 6.0

National Average 9.1

Source: US Bureau of Labor Statistics

55

Ten States Account for Almost 70% of All U.S. Loans in Foreclosure

State Percent

Florida 14.18

Nevada 10.06

New Jersey 7.28

Illinois 6.53

Arizona 5.67

Maine 5.27

New York 5.21

Ohio 4.93

Indiana 4.75

Hawaii 4.74

United States 4.63

Percent of All Loans in Foreclosure

Top Six States Account for Almost

50% of Loans in Foreclosure as of

4Q 2010

Source: National Delinquency Survey, Mortgage Bankers Association, Fourth Quarter 2010.

6

Rocky Mountain DistrictNational Rank

State Total Mortgage Loans

Percent Past Due (30+)

Percent in Foreclosure Inventory

Percent Past Due 90+

2 Nevada 516,906 12.0 10.06 4.69

5 Arizona 1,104,897 9.53 5.67 7.14

20 Idaho 256,491 6.71 3.57 8.95

22 New Mexico 276,900 7.08 3.46 6.81

27 Utah 433,456 7.76 3.26 6.66

38 Colorado 978,581 5.92 2.53 4.81

45 Montana 134,749 4.73 2.01 5.91

46 Texas 3,044,665 9.22 1.92 5.96

49 Wyoming 69,547 4.95 1.57 6.55

Total United States

43,579,051 8.93 4.63 8.57

Source: National Delinquency Survey, MBA, Fourth Quarter 2010

7

U.S. Home Prices Have Been on a Wild RideS&P/Case-Shiller U.S. National Home Price Index: 1988-2010

Sources: National Association of Realtors, S&P Case-Shiller Index. Data through November 2010

< 0.75%

0.75% to 2%

2% to 5%

> 5%

U.S.= 5%

House Price Correction from Current (2010Q1) to Trough, %

Sources: Fiserv, FHFA, Moody’s Analytics

Home Prices May Still Drop in Some Areas

8

Almost 11 Million Homeowners with Negative Equity as of 3Q. 2010

9

Mortgage Foreclosure Rates

10

Sources: Mortgage Bankers Association, S&P Case-Shiller Index. Data through November 2010

1111

Weak Economy Is Exacerbating Foreclosures for All Loan Types

Source: National Delinquency Survey, Mortgage Bankers Association, Fourth Quarter 2010.

Subprime ARMs

Prime ARMs

FHA

1212

Projected Mortgage Resets through 2012

13

Critical Homeownership Program Issues

– Lending• Credit markets remain very tight;• Many markets are experiencing appraisal issues;• MBS market showing some signs of sub-prime getting

back into the market;

– Core homeownership funding under threat• HUD Housing Counseling Program has been cut;• HOME, CDBG and Rural Development also were cut;• CDFI could take a cut (maybe as much as $183 million);• State and Local governments face budget shortfalls;

Bank Failures from 2008 - 2010

14

According to the its website, the FDIC is often appointed as receiver of failed banks. The FDIC assisted with 340 bank failures between 2008 and Feb. 2011. This compares with three (3) bank failures during the prior three-year period between 2005-2007.

Sources: Thechartstore.com; Federal Deposit Insurance Corporation, February 2011.

The Rising Deficit Will Constrain Federal Budget for Foreseeable Future

-$1,600

-$1,200

-$800

-$400

$0

$400

$800

$1,200

$1,600

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09

Federal Surplus {+} or Deficit {-} (Bil.$) 12-month MovingTotal

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09

Federal Government Outlays (12-Month Cumulative Total, Year over Year % Chg)Federal Government Receipts (12-Month Cumulative Total, Year over Year % Chg)

Record Federal Outlays Spending Increase While Receipts Collapse

15

44 States Expecting Serious Budget Shortfalls in 2011-2013

16

Source: Center on Budget and Policy Priorities, February 2011.

Homeownership Rate Declining Since 2005

17Sources: U.S. Census Bureau; Federal Reserve Bank of St. Louis.

2008 2009 2010

20%

23%

30%

39% 38%

42%

28% 27%

37%

District HOCs District Non-HOCs HOCs in Other Districts

FY2008 FY2009 FY2010 HBE HO Clients HBE HO Clients HBE HO Clients

District HOCs 3708 744 4734 1084 3797 1122District Non-HOCs 4149 1606 4290 1623 4155 1762HOCs in Other Districts 24108 6766 26772 7276 20619 7598

Conversion Rates of Consumers Educated to Homeowners Created - Comparison of RMD HomeOwnership Centers

1919

Homebuyers Created by NeighborWorks Network

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20100

2000

4000

6000

8000

10000

12000

14000

16000

18000

1996 - 2000 = 36,117

2001 - 2005 = 59,266

2006 - 2010 = 70,277

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1985

1990

1995

2000

2005

2010

2015

1996 - 2000 = 6,471

2001 - 2005 = 8,963

2006 - 2010 = 10,546

Homebuyers Created in Rocky Mountain District

Native Hawaiian/O

ther P

acific I

slander

American In

dian/Alask

an Native

Asian

Latino

Africa

n American

White

0.6% 1.3%5.5%

22.4% 19.3%

66.2%

0.2% 0.9% 4.8%

16.3% 12.6%

72.4%

NeighborWorks Network 2010 US Census 2010

Who Are Our Homebuyers

Chart Title

1st qtr 2nd qtr 3rd qtr 4th qtr0.0%

5.0%

10.0%

15.0%

20.0%

25.0%FY 10 1st Mtg Delinquency Trends by District

Great LakesMid AtlanticNew EnglandNorth CentralNortheastPacificRocky MountainSouthernNetwork Average

delin

quen

cy ra

te

1st qtr 2nd qtr 3rd qtr 4th qtr0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%FY10 2nd Mtg Delinquency Trends by District

Great LakesMid AtlanticNew EnglandNorth CentralNortheastPacificRocky MountainSouthernNetwork Average

delin

quen

cy ra

te

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Critical Homeownership Program Issues

• Role of CFPB – Consumer Financial Protection Bureau (www.ConsumerFinance.gov)– Nonbank supervision Program;– Consumer credit, consumer reporting services,

debt collection, debt relief services, pre-paid cards, check-cashing and money transmitting services;

– Agency goes ‘live’ July 21st;

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Universe of Housing Counseling Providers

• As of 2008, there were 1,800 HUD approved counseling agencies with broad range of missions and services – approximately 27 Intermediaries;

• There was at least one counseling agency in nearly a third of all counties–which account for four-fifths of the national population;

• HUD grants are the first or second largest funding source for nearly half of all counseling agencies—particularly for smaller agencies;

• Homebuyer Education and Counseling has historically been supported by government and philanthropic resources;

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Counseling Disproportionately Helps Disadvantaged Families and

Individuals

African Amer-ican

Hispanic0%5%

10%15%20%25%30%35%40%45%

Counselees Total US

<50% 50-80% 80-100% >100%0%5%

10%15%20%25%30%35%40%45%50%

Household Income as Percent of Area Median Income

Source: The State of the Housing Counseling Industry, HUD, 2008; Worst Case Housing Needs: 2009 A Report to Congress, HUD 2011; US Census Bureau, Decennial Census 2010.

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Increasing Affordability Problems Suggest Greater Need for Owner and Renter Counseling

Bottom Lower Middle Upper Middle Top

-500

0

500

1,000

1,500

2,000

2,500

OwnersRenters

Household Income Quartile

Increase in Households Paying More than 50% of Income for Housing 2001-2009 (000s)

Foreclosure Counseling has Proven Impact

Counseling does at least three things to improve sustainability of loans:– Raises the rate of receiving a modification that

cures a serious delinquency or foreclosure;– Larger reduction in monthly mortgage payments

in modified and cured loans; and– Improves the sustainability of modified and cured

loans beyond the impact on monthly payments, presumably through financial counseling and, in some cases, assistance. Source: Urban Institute – NFMC Study

HECM Counseling Provides Critical Resources

– Over 40% of clients are lower-to-middle income families who may not have access to a financial advisors

– Since September 15 2010, 38,650 HECM counseling clients have received a BenefitsCheckUp screening.

• 88% could be eligible for one or more benefits. • Potential value of benefits could be $197 million.• Public-private approach to maintaining independence.

– Counselors address both immediate budget shortfalls and challenges to aging in place.

• Help seniors to think strategically about home equity.• Discuss exit strategies to reduce foreclosure risk.

Source: National Council of Aging

3232

Opportunities Ahead

• Personal savings are up• U.S. households debts are down• Mortgage rates are near 50-year lows• With low rates and low housing prices,

affordability is greatly improved• Household growth has slowed but continues• U.S. population is growing more diverse• First-time homebuyers are driving the market• Technological changes can help reach new

buyers

Technology Spreads

36

According to recent federal study, only 5-10% of Americans do not have access to Broadband Internet services

37

• U.S. population has grown to 311 million and is increasingly diversified

• Household growth has slowed but will continue over the next two decades

• Hispanics accounted for 50% of national growth since 2000 (compared with 14% of Asians, 13% for blacks and 17% for whites)

• Immigrants now comprise 12.6% of the total U.S. population (and 44% of those residents under age 15)

• From 2000-2007, the U.S. foreign-born population grew by 22% to 38 million

• By 2007, 30% of the nation’s foreign-born population were from Mexico and 23% from Latin America

U.S. Demographic Changes: 2000 - 2010

Source: Willam Frey, Recent Demographic Trends in Metropolitan America, Brookings Institution, 2010

Record Numbers of Young Householders by 2025

39Source: The State of the Nation’s Housing Report 2010. Joint Center for Housing Studies

Growing Diversity of the U.S. Population

40Source: The State of the Nation’s Housing Report 2010. Joint Center for Housing Studies

Born 1977-1997

Born 1946-1964

Born 1965-1976

The generations following the Baby Boomers are large and diverse. Over 40% of future first-time buyers will minority buyers

Future Homeownership Markets

Housing will be driven by four demographic groups for next 5 – 10 years:• Older Baby Boomers – who will become seniors,

retiring and/or downsizing• Younger Baby Boomers – many will be unable to sell

their ‘underwater homes’ to move to new jobs and may have older children living in their household

• Generation Y – who will graduate from college with large school loans and who may rent longer than previous generations

• New immigrants and their households

42

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First-Time vs Repeat Buyers

First-Time Buyer: Repeat Buyer:

30-years-old 48-years-old

$61,600 $88,100

49% married 69% married

25% single females 17% single females

12% single males 8% single males

12% unmarried couples

5% unmarried couples

Source: National Association of Realtors – “2009 Profile of Home Buyers and Sellers”

First-time homebuyers are significantly younger and unmarried than repeat buyers

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Many First-Time Buyers Are Unmarried

Single Female:

Single Male:

Married Couple:

Unmarried Couple:

41-years-old 39-years-old 39-years-old 30-years-old

$50,500 $59,700 $85,500 $73,600

58% first-time buyers

58% first-time buyers

39% first-time buyers

69% first-time buyers

22% have children under 18

10% have children under 18

49% have children under

18

26% have children under

18

Source: National Association of Realtors – “2009 Profile of Home Buyers and Sellers”

Single females, single males and unmarried couples are significant target markets

45

Age Breakdown of Home Buyers in 2009

18 to 246%

25 to 4456%

45 to 6430%

65 or older8%

Source: National Association of Realtors – “2009 Profile of Home Buyers and Sellers”

46

Home Buyers By Age Cohorts in 2009

18 to 24 25 to 44 45 to 64 65 or older

23-years-old 32-years-old 53-years-old 69-years-old

$48,400 $75,300 $79,600 $56,100

97% first-time buyers

61% first-time buyers

24% first-time buyers

9% first-time buyers

18% have children under

18

49% have children under

18

28% have children under

18

5% have children under

18

Source: National Association of Realtors – “2009 Profile of Home Buyers and Sellers”

First-time homebuyers are skewing younger

47

First Step Taken in Home Search

White/Caucasian:

Black African-

American:

Hispanic/Latino:

Asian/Pacific

Islander:

Looked online for properties for sale 38% 22% 26% 31%

Contacted a real estate agent 18% 17% 23% 13%

Looked online for information about the home buying process 10% 15% 12% 23%

Contacted a bank or mortgage lender 8% 12% 11% 8%

Drove-by homes/neighborhoods 8% 8% 6% 4%

Talked with a friend or relative about home buying process 7% 9% 10% 7%

Visited open houses 4% 3% 3% 3%

Looked in newspapers, magazines, or home buying guides 3% 2% 2% 2%

Contacted builder/visited builder models 2% 3% 2% 2%

Attended a home buying seminar 1% 6% 2% 3%

Source: National Association of Realtors – “2009 Profile of Home Buyers and Sellers”

Classes and counseling efforts are only capturing a tiny share of home buyers

48

Use of Internet in Home Search

White/Caucasian Black/African American Hispanic/Latino Asian/Pacific Islander0

10

20

30

40

50

60

70

80

90

100 90%88% 87%

92%

10% 12% 13% 8%

Used Internet to search Did not use Internet to search

Source: National Association of Realtors – “2009 Profile of Home Buyers and Sellers”

Vast majority of homebuyers use the Internet at home or work to search for homes

What does this mean?• Housing counseling industry must embrace standards such

National Industry Standards—raise the visibility that is this a highly trained group of professionals who are held to rigorous standards;

• Diligent about tracking pipelines and results---through use of sophist acted customer tracking systems---they not just for reporting anymore;

• Become more self examining---as way of illustrating the value proposition;

• Mine success stories of successful customers---have them spread the word to your circles on influence;

• Use internal and external market data to target services –not one-size fits all;

• Leverage technology and innovative partnerships;• Market to a different homebuyer; maybe a new way to deliver

services

Rocky Mountain District Symposium Homeownership Trends and Data

The Brown Palace Hotel - DenverJune 28 – 30, 2011